Search smh:

Search in:

Markets Live: Investors flee stocks

Local stocks slump after Wall Street fell on concerns about the budget debate in Washington while an Israeli air strike and widespread austerity protests in the eurozone helped push European stocks lower.

Miners and Banks have taken the largest hits today as a myriad of events plague our market. Obama's speech failed to calm the markets anxiety over the pending fiscal cliff, details emerged that Greece’s recession is deepening, and tensions escalating in the Middle East all added to the panic selling.

Obama’s speech overnight is the key reason we are taking such a hit today. While the markets were hoping for the Democrats and Republicans to stop playing hardball and find some middle ground the opposite seems to be happening.

Obama believes he has a mandate from the people to repeal the Bush tax cuts for high income earners, which the Republicans strongly oppose. Increasing taxes for the rich has the two parties in a stalemate and is not something the market wanted to hear.

News of Israeli airstrikes on the Gaza strip and a flash estimate that had Greece’s GDP contracting further ahead of new austerity measures have done little to incite confidence at this time.

4.20pm: The market has closed sharply lower. The benchmark S&P/ASX200 index plunged 39.2 points, or 0.9 per cent, to 4349.2, while the broader All Ords lost 40.1 points, or 0.9 per cent, to 4370.6.

3.58pm: The chairman of Grid Australia, Peter McIntyre, has apologised to farmer and electricity industry critic Bruce Robertson for making legal threats and has withdrawn the action.

The back-down comes in the wake of a widespread public outcry over legal intimidation by the power companies, most of which are controlled by state governments.

Grid Australia is the peak body for the state electricity transmission giants. It appears the action may not have been legal anyway, due to the fact that it is not a registered corporate entity.

3.40pm: Australia’s digital economy grew significantly in 2011/12 with online shopping, social networking sites and a near doubling of smart phone ownership helping drive the boom.

Online shopping activities grew 27 per cent in the 12 months to July 12, according to a new report by the Australian Communications and Media Authority (ACMA).

There are now 11.36 million Facebook users in Australia, 9.67 million YouTube users and, in the 12 months to July 2012, 12.27 million people accessed online news sites.

3.12pm: All but one of the sectors on the ASX200 are down today:

Materials: -1,84%

Information technology: -1.65%

Energy: -0.92%

Industrials: -0.85%

Utilities: -0.76%

Finance: -0.69%

The only bright spot is the Telecoms sector, up 0.35%

3.05pm: Less than an hour to go and the major indices are firmly in negative territory. In recenbt trade the All Ordinaries index was 38.9 points lower, or 0.9 per cent, to 4371.8, while the benchmark S&P/ASX200 is 37.2 points lower, or 0.8 per cent, to 4351.2.

It's been a fairly down kind of a month. On October 19 the ASX200 was at 4571.1 - that's a drop of 219.9 points - almost 5 per cent.

2.55pm: More on the RBA increasing its holdings of foreign currency assets last month, with some anlaysts seeing the move as part of a recent trend that appears to signal its growing frustration with the strength of the dollar.

The Reserve Bank accumulated $457 million worth of foreign currency in October, the third month of $400-million-plus increases, compared with a monthly average rise of roughly $90 million since the start of 2010.

The RBA has repeatedly said the currency is historically, high especially given sharp falls in the prices for resource exports, but has stopped short of actual movements to push down the dollar. Deputy Governor Philip Lowe recently said any large-scale intervention would be a very big step which would only be taken ‘‘in extremis''.

Greg Gibbs, a strategist at RBS says it show the Reserve is trying to intervene, though stealthily:

This suggests that they may have sold around A$400 million in the process of attempting to slow the dollar’s rise. It’s not a huge amount, but it is cumulative, and if the RBA were to continue at this pace for some months it will steadily soak up a lot of additional demand for the dollar. They probably don’t mind the market talking about it and that suggests some level of concern about the currency. They are hoping it’ll have some psychological and real impact.

In the year to June, Bluescope lost $1.04 billion, little changed from the $1.05 billion loss struck a year earlier, as the company continues to battle the adverse effects of the strong Australian dollar, which has forced it to slash production levels.

Despite the gloomy outlook, Bluescope shares are up 1.5 per cent at 46.7 cents.

2.32pm: Australia’s dollar has dropped almost a cent after the the US Federal Reserve said it might consider further market stimulus and the RBA said it increased sales of the currency last month.

The dollar hit a low of $US1.0349 in the late morning after trading as high as $US1.0457 overnight. It’s since come back up a touch and was at $US1.0379 recently.

The Reserve Bank sold $483 million more Australian dollars than it bought in October, the most since June 2009.

There will likely be more chatter that the RBA is perhaps conducting off-market, central bank-to-central bank transactions, The Aussie is considered to have been strong due to these market transactions for investors buying our government debt. If it’s being conducted off market, then perhaps that takes some pressure off the upside for the currency.

2.19pm: BusinessDay’s Peter Ker has come up with this little nugget about Fortescue:

"The sums of money involved would scarcely buy 300 metres of railway in the Pilbara, yet Fortescue Metals Group’s surprise expansion into shale oil and gas is intriguing none the less.

"In what shapes as the company’s first steps toward diversification beyond iron ore, Fortescue has emerged as the new cornerstone investor in tiny, Melbourne-based shale aspirant “Oil Basins Limited”.

"The $4.2 million investment will give Fortescue 18 per cent of “OBL”, and that stake could grow further under options tied to the deal.

"Apart from being Fortescue’s first plunge into the energy sector, the deal could write another chapter in the company’s rivalry with BHP Billiton."

The Melbourne Institute’s consumer inflation expectations survey for November released today found households predicting a consumer price index (CPI) of 2.2 per cent over the coming 12 months, down from 2.7 per cent as of October.

This was lowest survey outcome since early 2009 and predicts inflation at the bottom end of the Reserve Bank of Australia’s (RBA) two to three per cent inflation target.

‘‘This provides the RBA with a bit of room to stimulate growth should (downward) risks coming out of Europe, the US and China increase,’’ research fellow at the institute Viet Nguyen said.

1.47pm: Myer may be seeing light at the end of the tunnel, but it's not celebrating yet. Boss Bernie Brookes is preparing for a worst-case scenario of a flat Christmas trading period despite six months of comparative sales growth for the department store and a recent cut in official interest rates.

Brookes said that the Australian consumer was still feeling fragile due to continued concerns over Europe's economic crisis and fears about a rise in local unemployment. Myer had placed forward product orders for a flat Christmas this year, he said.

However, the department store, which on Thursday posted its second consecutive quarter of same-store sales growth, had the ability to quickly ship in extra stock in the last few days before Christmas if the shopping season proved stronger than anticipated, Mr Brookes said.

1.35pm: Gindalbie Metals is celebrating today after getting its first production of magnetite concentrate out of its plant in Western Australia, writes BusinessDay’s Peter Ker.

While the ramp-up of the plant will take many more weeks, it means Gindalbie has almost certainly won the race into production between the two big Chinese-owned magnetite plants in WA.

The Clive Palmer linked Citic magnetite project near Karratha is still languishing with delays and cost overruns.

Shares in Gindalbie are up more than 5 per cent at 31 cents.

1.28pm: BusinessDay’s Adele Ferguson has been looking at Myer’s first quarter sales figures, which sent shares in the deparment store soaring today. Adele writes:

It's early days but feelings about ... Myer might just be turning the corner, with sales up in the first quarter of 2013 and investors pushing the company's share price up 6 per cent to a six-month high. Myer kicked off the first quarter of 2013 with consumers spending $688 million in its stores, up 1 per cent on last year, as the company started to focus on customer service. It has also started playing hardball with suppliers to try and close the gap between the price consumers can source products in online stores overseas versus the price charged in the local stores.

1.15pm: More from the Seven Group Holdings AGM, where the company says the outlook is strong, but that it is reviewing both its Caterpillar business in China and, as we mentioned earlier, its stake in Coates Hire.

Seven’s executive chairman, Kerry Stokes, told shareholders in Sydney that it had been a challenging 12 months for its territories in China particularly in the latter part of the financial year and ‘‘we are currently working to ensure that our cost base there reflects this lower level of demand’’.

Mr Stokes said the outlook for Seven was strong, with the company expecting first half underlying net profit in the range of $200 million to $220 million.

The Melbourne Institute’s consumer inflation expectations survey for November has found households predicting a consumer price index of 2.2 per cent over the coming 12 months, down from 2.7 per cent as of October.

This was lowest survey outcome since early 2009 and predicts inflation at the bottom end of the Reserve Bank of Australia’s 2 to 3 per cent inflation target.

‘‘This provides the RBA with a bit of room to stimulate growth should (downward) risks coming out of Europe, the US and China increase,’’ research fellow at the institute Dr Viet Nguyen said.

1.00pm: More economic data from the ABS, this time it seems like good news, with cotton and canola production hitting record highs in the 2011/12 crop year.

Canola production was 3.4 million tonnes, up 44 per cent from last year and the highest since the 1999/2000 season.

Cotton production rose 12 per cent to 944,000 tonnes, ABS said.

12.57pm: The AGMs just keep on coming. Also on today we have industrial and media conglomerate Seven Group Holdings, which has flagged a strategic review of the Coates Hire business it co-owns with private equity firm The Carlyle Group.

Seven said the process is response to recent interest in the asset - of which it owns 45 per cent - with Goldman Sachs placed in charge of the review of ‘‘ownership alternatives’’.

The two partners attempted to float the business with a $3 billion valuation earlier this year and Seven managing director Peter Gammell signalled the current process is driven more by Carlyle looking for an exit than Seven looking for a transaction.

‘‘Clearly there is not an IPO market available at the moment, but we have had some inbound inquiries as a result of that whole process,’’ he told reporters after the meeting.

Seven Group shares are down 1.2 per cent at $6.39.

12.54pm: Heading in to lunchtime and things are still heading downward. In recent trade the All Ordinaries index is 47.3 points lower, or 1.1 per cent, to 4363.4, while the benchmark S&P/ASX200 is 45.5 points lower, or 1.0 per cent, to 4342.9.

"It's just a follow-through risk seen from U.S. markets. Of course we did just see a sharp selloff on Wall Street as we approach that fiscal cliff," said Stan Shamu, market analyst at IG Markets.

"It just seems that there's not much confidence out there," he said.

12.42pm: There's plenty of AGMs on today. We've looked at a couple, now it's Asciano's turn, with the ports and rail operator telling shareholders that it's operating in a difficult economic environment and is frustrated by the disappointing performance of its share price.

Chief executive John Mullen said Asciano had a good year, lifting its profit for the 12 months to June 30 by 43 per cent to $242.7 million, and was well positioned to deliver another year of solid earnings growth and to continue to deliver on its ambitious financial targets.

Asciano's share price is at $4.24, up 1.4 per cent today, but down six per cent for the year and - more worryingly for investors - down 83 per cent from the $24-$25 it listed at in 2007. Mr Mullen is hopeful of better days to come:

We do remain disappointed that our share price has not reflected the improvements in performance being made by the company. This is as frustrating to us as I am sure it is to shareholders, but all we can do in such an environment is to continue to deliver on our shareholder return targets and ultimately the value being created will surely have to flow through to appreciation in our share price as well.

12.32pm: Back to Qantas and BusinessDay's Elizabeth Knight, who says the prospect of the airline whittling down its debt by $650 million came as a welcome surprise to shareholders who have become more familiar with disappointments.

The capital restructure provides a sense to the market that Qantas is sufficiently confident in its strategy to revive earnings that it won't require the cash from the sale of freight company Star Track as a buffer against lean times. In other words the company is confident that the work it is doing to fix the international business will get traction. Certainly the tie-up with Emirates, which gives Qantas the use of a phantom network, is a big step in the right direction from a financial perspective.

12.19pm: More on expectations for retailers over the Christmas period and a story from BusinessDay's retail reporter, Eli Greenblat, who's been looking into a report which predicts online spending growth will more than triple this festive season.

Figures from business information analysts IBISWorld predict overall Christmas spending will rise by 3.9 per cent this year, but growth in online retailing will surge by 34.4 per cent compared with growth just below 10 per cent between December 2010 and 2011.

The average Australian, IBISWorld says, will spend $1600 to bring the total to $28.5 billion

12.02pm: The Lynas saga seems set to run and run with activists in Malaysia appealing to the High Court over last week's ruling that it could use a temporary operating licence for its rare earths plant.

Lynas shares rose to 80 cents after last week’s judgement but the news that the activists were still seeking an interim stay on the temporary operating licence has sent Lynas shares down once more today.

Lynas shares - down almost 10 per cent earlier in the day - have lost 6.1 per cent to 61½ cents.

11.57am: More from AGM season, and today it's Mirvac’s turn, with the property developer saying it sees some areas of strength in the NSW housing market but believes a recovery in Queensland is still some time away.

Chairman James MacKenzie says the Australian residential property market is stronger than many international markets and was expected to remain stable in the short term.

‘‘Specifically, we see pockets of strength in NSW combined with continued weakness in southeast Queensland and the outer suburbs of Melbourne,’’ Mr MacKenzie said.

‘‘Queensland continues to be our weakest market with expectations of a sustained recovery still some time away,’’ she told the meeting.

Shareholders were also told Mirvac was on track to meet its full-year earnings guidance of 10.7 to 10.8 cents per stapled security. Mirvac shares have fallen 0.7 per cent at $1.445 this morning.

11.43am: Car sales data out this morning makes gloomy reading with sales of new motor vehicles down 2.8 per cent, seasonally adjusted, in October.

In the month, 95,720 new vehicles were sold, seasonally adjusted, compared with a downwardly revised 98,436 in September, according to Australian Bureau of Statistics (ABS) data.

11.24am: Oil prices have been little moved by the unfolding events in Gaza but if tensions between Israel and Hamas escalate that could change, said Commsec market analyst Julianna Roadley.

“There was a bit of a spattering of information so no one knew exactly what was going on and then when all the vision hit the screen, there were so many other things in play that the market just sold off on the back of that,” Ms Roadley said.

“At the moment there’s been no real movement, but in time you could see some movement coming through,” she said.

Ms Roadley said that if the US starts talking about pulling assets from its ‘strategic reserve’ to fill gaps in supply, the oil price would likely skyrocket.

Brent Crude is up 1.2 per cent to $US109.61 per barrel, while New York oil futures are flat at $US86.38 per barrel.

11.15am: A bit over an hour into today's session and markets are down about 0.8 per cent. The losses are broad-based, with all but consumer staples and telecoms sub indices on the ASX200 lower.

Materials are leading the losses, down 1.79%. Among the biggest losers on that sub index:

Mineral Deposits: -12.91%

Lynas Corp: -9.92%

Sims Metal Management: -5.03%

Kingsgate Consolidated: -4.50%

Newcrest: -3.54%

11.10am: IG Markets analyst Cameron Peacock said the Australian market had followed Wall Street’s lead. The Dow Jones Average plunged to close at 184.92 after US President Barack Obama challenged Republicans to accept tax increases for the wealthy in a deal to avert the so-called year-end fiscal cliff.

‘‘What happens there happens here these days,’’ Mr Peacock said.

11.03am: In Christmas present terms, retailers can expect a few stocking fillers rather than a festive haul over the holiday season.

The Australian Retailers Association (ARA) says shoppers are expected to put about $41.2 billion through retail tills from now until December 25.

ARA executive director Russell Zimmerman said those predictions, prepared by Roy Morgan Research, represented a steady 3.9 per cent gain on sales of $39.7 billion during the corresponding period last year.

‘‘While we by no means expect shoppers to be beating down the doors to go Christmas shopping, especially in the early stages, the figures represent growth which will see retailers hear some rings of their tills,’’ Mr Zimmerman said.

10.51am: The retailers are enjoying a positive morning thanks to the positive news from Myer:

Woolies: -0.67%

Wesfarmers: +0.81%

Harvey Norman: +0.69

David Jones: +3.66%

Myer: +5.5%

10.46am: Among the big miners:

BHP is 1.26% lower to $33.30

Rio is 1.87% lower to $56.77

Fortescue is 1% lower to $3.96

10.43am: Property developer Lend Lease says that while lower interest rates are encouraging more people to start house hunting, sales remain sluggish.

Security holders at Lend Lease’s annual general meeting heard that while the group expected a rise in property settlements this financial year, they would be struck at lower prices.

‘‘We are beginning to see inquiry levels increase in response to lower interest rates, but the uncertain environment and the lack of impetus to buy in a market where valuations are not increasing, means this is not yet translating into sales,’’ chairman David Crawford said.

10.33am: The ASX200 has sunk to its lowest level since 27 September in early trade - dipping as low as 4348. It has since tracked back to above 4350.

10.26am: The worst performed companies on the ASX200 include:

Mesoblast: -8.21%

Mirabela Nickel: -6.02%

Coalspur: -5.45%

James Hardie: -4.68%

Sims Metal Management: -4.6%

BoQ: -4.56% ** trading ex div

10.24am: Qantas is currently the best performed company on the ASX200 - up 5.59 per cent. Here are the other gainers in a falling market:

CSL: +3.9%

Myer: +3.5%

David Jones: +3.25%

Flight Centre: +2.08%

Fairfax: +1.27%

Primary Health: 0.79%

10.19am: Telecoms is the only sub index bravely swimming against the flow this morning, posting a modest 0.07 per cent gain in opening trade. The rest are down:

Info tech: -1.85%

Materials: -1.56%

Health: -0.82%

Industrials: -0.77%

Financials: -0.73%

Energy: -0.7%

10.15am: The Australian share market has opened almost 1 per cent lower. The benchmark S&P/ASX200 index was down 39.1 points, or 0.9 per cent, at 4,349.3, while the broader All Ordinaries index was down 39.2 points, or also 0.9 per cent, at 4,371.5.

On the ASX 24, the December share price index futures contract was down 40 points at 4,360, with 8,654 contracts traded.

10.10am: Shares in Myer are also higher in early trade - up 1 per cent - after the retailer announced sales rose by one per cent in its first quarter thanks to warmer weather and sentiment improving slightly thanks to interest rate cuts.

10.08am: Qantas shares are higher this morning - up 2.8 per cent or 3.5 cents to $1.2265 - on news it will spend $100 million to buy back about four per cent of its issued stocks in a move to strengthen its dwindling share price. The airline has also announced it will repay $650 million of debt ahead of its due date as it moves to strengthen its balance sheet.

10.06am: Early take - stocks down about 0.5 per cent as markets open.

9.59am: Building products maker James Hardie’s first-half profit has fallen 35 per cent but the company says there are good signs in its key market, the United States.

James Hardie made a net profit of $US83.5 million ($A80.86 million) in the six months to September 30, down from $US128.4 million ($A124.34 million) in the same period in the previous year.

The result included an unfavourable adjustment to the company’s asbestos liabilities due to a stronger Australian dollar.

Chief executive Louis Gries on Thursday said there were signs of a sustainable housing recovery in the United States, where the company generates a majority of its earnings. But the Australian market remains subdued despite recent interest rate cuts, reflecting low levels of confidence among domestic consumers.

9.52am: The Aussie dollar has been one of the victims of the dive in investor sentiment overnight. It's now trading at $US1.0363, down from an overnight peak of $US1.0456.

BK Asset Management managing director Kathy Lien said the Aussie currency had followed US stocks down, following comments from the US Federal Reserve suggesting it was considering a bond-buying program to stimulate the labour market.

‘‘They expressed renewed concerns about the US economy,’’ she said.

‘‘I think investors are realising that this concern from policy-makers, including in the US, means the potential for slower growth for Australia.

‘‘So, although the comments should be US-dollar bearish, the selloff in US stocks is having a much greater impact on the Aussie dollar.’’

In a statement released with its annual results Graincorp said ADM's cash offer of $11.75 a share "materially undervalues" the company and it had advised ADM accordingly. ADM had been hoping to secure a board recommendation for its takeover offer.

Graincorp also announced a 19 per cent increase in net profit after tax to $204.9 million for 2011-12 and a fully-franked final dividend of 20c a share plus a special dividend of 15c a share.

9.44am: Qantas Airways will spend $100 million to buy back about four per cent of its issued stocks in a move to strengthen its dwindling share price.

‘‘The board believes the current Qantas share price does not reflect fair value of the group, particularly considering the underlying strength of its domestic, loyalty and Jetstar businesses and the proposed partnership with Emirates,’’ chairman Leigh Clifford said in a statement.

Qantas shares last traded at $1.23, well down on the $1.815 they were worth at the end of March - their highest point in the last 12 months.

9.39am: Some analyst rating changes for today:

Seven West Media raised to 'buy' at Deutsche Bank

Seven West Media raised to 'outperform' at Macquarie

Paladin Energy cut to 'speculative buy' at Cormark Securities

Perseus Mining raised to 'outperform' at RBC Capital

9.35am: To put it simply, it was a bad night for sentiment on global markets. Europe was down as protestors across the continent marched to express their opposition to austerity measures. Israel bombed Gaza, further rattling investors and bolstering concern that unrest in the Middle East will intensify and affect oil supplies.

And stocks in the US slumped, sending the S&P 500 to its lowest level since late July, on uncertainty over US budget negotiations and an escalation of violence in the Middle East.

‘‘The recent wall of worry continues to mount,’’ said Ryan Larson, the Chicago-based head of US equity trading at RBC Global Asset Management.

‘‘Middle East geo-political tensions, continued sovereign concerns about Greece and Spain, indecision ahead of the fast-approaching fiscal cliff and the fact that the major US indices continue to trade under key technical levels are all weighing on sentiment.’’

9.32am: For a comprehensive look at this morning’s business news, check today’s need2know. Here are this morning’s key market links:

The SPI was down points 52 at 4358

The $A was trading at $US1.0382

In the US, the S&P500 lost 1.39% to 1355.49

In Europe, the FTSE100 lost 1.11% to 5722.01

China iron ore added 8 US cents to $US122.40

Gold 0.3% to $US1728.34 an ounce

WTI crude oil added $US0.88 to $US86.26 a barrel

RJ/CRB commodities index was flat at 292.57

9.30am: Hi everyone. Welcome to the Markets Live blog for Thursday.

Contributors: Thomas Hunter, Richard Hughes, Jens Meyer, Max Mason

This blog is not intended as investment advice

BusinessDay with agencies

30 comments

"‘The board believes the current Qantas share price does not reflect fair value of the group, particularly considering the underlying strength of its domestic, loyalty and Jetstar businesses and the proposed partnership with Emirates,’’

The can't even earn the cost of of capital or pay a dividend. Seriously these airline execs live in an alternative universe.

Commenter

Allan

Location

Prahran

Date and time

November 15, 2012, 9:54AM

dont you know Dixon/Joyce each own a property on the moon ? They can afford with their big fat bonus yearly

These utilities companies are out of control, borrowing huge sums to fund massive capital expenditure to justify massive bill hikes which are in turn used to justify massive executive payments. Enough! We need a Royal Commission into the gouging going on after the privatisation of utilities and then they should be forcibly repurchased by the state.

Commenter

Allan

Location

Prahran

Date and time

November 15, 2012, 10:51AM

Fantastic! Royal Commissions have always proven to be inexpensive efficient means at addressing problems! No better way to further compound debt.

Commenter

Debt?

Location

Date and time

November 15, 2012, 12:02PM

It will a lot cheaper than the gougers currently running the show. I guess if you're a gouger or a gouger's recipient you won't like the idea.

Commenter

Allan

Location

Prahran

Date and time

November 15, 2012, 1:51PM

@Alan, so your happy for your water and sewage networks to fail and leave us screaming at the operators and government.. Why do you think the Governement corporatised and privatised utilities, other than raking in mega millions from them, it offloaded the responsibility to fix an ailing network of infrastructure that had been neglected for decades. A Royal Commission, now that'll help, not.

Commenter

Cododa

Location

Melb

Date and time

November 15, 2012, 2:33PM

Large scale public infrastructure should be nationalised. Private is not more efficient running a monopoly. Sewearge and water systems will fail... Pull the other one it plays jingle bells.